#3 – Shifting the Burden of Tax Collection

What’s so iAWFUL?

These laws would only harm in-state businesses and diminish resident’s privacy, just to extract a small increment of sales tax from citizens’ pockets.

(AR SB527), (UT SB125)

Two states proposed two laws that would only harm their in-state businesses and transfer money from their citizen’s pockets into the state coffers.

NY State wisely pulled back at the last moment, as a provision in its budget bill would have forced marketplaces to collect taxes for sales by others. This tax mandate would have created a significant barrier to attracting new jobs and investment to New York, since it would discourage the growing array of online marketplaces from creating any presence in the state.

Marketplaces are not anxious to add new tax obligations for every seller used by customers in New York, so they will refrain from hiring any employees or investing in New York. Large online marketplaces that decide to stay in New York will lose sales as sellers leave their marketplace to avoid new sales tax burdens.

AR SB 527 is based on a Colorado law that federal courts have already ruled to be unconstitutional.

Arkansas’s purchase reporting bill threatens citizen privacy.  This bill exposes private purchases to potential abuse and leaks by the state’s tax department. Moreover, the bill is based on a Colorado law that federal courts have already ruled to be unconstitutional. Shortly after enactment, a federal court in Colorado enjoined the Colorado reporting mandate. Five years later, the law still remains enjoined and the state has spent thousands of dollars trying to overturn the decision.

Like the Colorado law, SB 527 would impose undue burdens on out-of-state sellers, pointing to similar constitutional infirmities and an expensive court battle with a predictable outcome.

The mandated disclosure of Arkansans’ buying habits is not only invasive, but federal courts have determined that it violates the first amendment. A federal district court struck down a North Carolina reporting mandate similar to SB 527, saying:

“The First Amendment protects a buyer form having the expressive content of her purchase of books, music and audiovisual materials disclosed to the government. The fear of government tracking and censoring one’s reading, listening and viewing choices chills the exercise of First Amendment rights.” Amazon Inc. v. Lay, Case No. C10-664 MJP (WA Fed Ct, Oct. 2010).

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